When will the Bull market end?

"As a bull market continues, almost anything that you but goes up.  It makes you feel like investing in stocks is very easy and safe and that you're a financial genius." - Ron Chernow

I am repeatedly asked when I think the Bull market will end so it was interesting when I read a blog article today written back in November 2013 by Manley Market Insight where he answered the question by pointing to three reasons for a possible decline:  1) the Federal Reserve adopts a restrictive monetary policy; 2) sales and earnings decline sharply without prompting from the Federal Reserve; and, 3) valuations become too high and collapse on their own weight.

I completely agree with him but it appears to me that we do not only have one of these problems but all three.  Right now we have a Federal Reserve that has stopped printing money and is hinting at raising interest rates (restrictive monetary policy); corporate sales have been declining for a while and the US Commerce Department announced that in Q4 2014 corporate profits fell 3% and are on pace to decline again in the first quarter of 2015; and no matter what market metric you look at the market is way overvalued.  In fact the market is at its second highest level in its history.  With trading volumes dropping and the length of the bull market at six years already almost twice as long as the average bull market, it appears to me that we may have a triple play brewing.

A lot of the cause of this is the recent strength of the US dollar.  The vast majority of the fortune 500 rely on expansion and growth in markets outside of the Untied States and with weakness in foreign currencies and countries, sales growth and profits are being hit.  Even the benefit of the lower oil price is muted as consumers are not only saving the extra cash but they have not really felt the full impact as prices at the pump have risen by almost 20% during the last two months.  Volatility is also picking up with the most 1% daily moves since Q4 2011 right before the last 10% correction.

With all of the poor economic news coming out of Europe, Asia and South America I cannot imagine that the Federal Reserve will be dumb enough to raise rates any time soon.  In fact the one thing that no-one is talking about is the next round of quantitative easing from the Federal Reserve.  Personally I expect more easing before any type of interest rate increase.  In fact I expect that this year there will be a 10% plus correction in the market that will force the Federal Reserve to inject more stimulus into the economy.  Unfortunately the type of stimulus that they are akin to use has never worked and hence it will be more futility and cause a larger problem later, however it will have the effect of stimulating the market to possibly new highs.

As I have mentioned above the market is on a seriously rocky road and the stimulus is not a fix but rather a larger problem.  If you are looking for a place at which to sell, this might be a good time to diversify out of the market and head to distant shores.